HomeMy Public PortalAboutStaff Report 2302-09152.Comprehensive Economic Development Strategy Update and Study Session
Item No. 2. Page 1 of 6
CITY COUNCIL
STAFF REPORT
From: City Manager
Report Type: Study Session
Lead Department: City Manager
Meeting Date: February 13, 2023
TITLE
Comprehensive Economic Development Strategy Update and Study Session
RECOMMENDATION
Staff recommends that the Council receive this report and provide feedback on critical focus
areas for inclusion in the drafting of a Comprehensive Economic Development Strategy.
EXECUTIVE SUMMARY
This report and accompanying study session represent the next step in the City’s creation of a
Comprehensive Economic Development Strategy. The City’s consultant, Streetsense,
‘diagnostic’ is attached to this report and will be the focus of the study session. The purpose of
the study session is Council discussion and feedback on the diagnostic findings and draft
Guiding Principles. Both of these and the general consensus of the City Council through its
discussion will be used to inform the next and final step of drafting the comprehensive
economic development strategy.
Streetsense is working to “develop a market-informed economic development strategy that will
ensure Palo Alto's post-COVID competitiveness by identifying impactful public sector
interventions, policies and investments for which there is both need and consensus for action.”
Streetsense was selected as the consultant to create the Comprehensive Economic
Development Strategy and presented their first impressions to Council on November 7, 2022.
The first phase of their work was focused on learning and gathering data and speaking with
stakeholders. This second phase of their work, the diagnostic, is focused on analyzing and
synthesizing the information they gathered to accurately assess and discuss the issues we are
facing as a City.
BACKGROUND
This study session is the second of three planned discussions between Streetsense and the City
Council regarding the creation of a comprehensive economic development strategy. On
November 7, 2022, Streetsense presented their in-progress work to City Council. At that
meeting, they discussed the purpose and goals of the comprehensive economic development
Item No. 2. Page 2 of 6
strategy, the phases and timeline of their project, and preliminary considerations and findings
from their work to date.
The report for the November 7, 2022 study session is available online1, as is the presentation2,
and the video of City Council’s discussion3, and the summary minutes from the meeting4.
Following their discussion with the City Council in November, Streetsense continued their
information collection and research phase. Streetsense has since completed the diagnostic, the
second phase of the project, which is the focus of this report and accompanying study session.
The third and final phase will be the creation of a comprehensive economic development
strategy with recommendations. This third phase will also be brought to the City Council for
consideration and adoption.
ANALYSIS
Before reaching the third and final phase of Streetsense’s work, it is important that
stakeholders – including the City Council – share a collective understanding of the challenges at
hand within the city limits of Palo Alto. The attached diagnostic is important to establish
consensus on the areas that Streetsense will target in its a comprehensive economic
development strategy. Recommendations in this strategy will be guided by this diagnostic and
the stakeholder feedback surrounding it, ultimately leading to support through City
investments, interventions, policies, and programs.
Streetsense’s work focuses on six study areas that have been classified into three categories.
•‘Regional/super-regional centers’:
1. Downtown/University Avenue
2. Stanford Shopping Center,
•‘Community-serving centers’:
3. California Avenue
4. Town & Country Village, and
•‘Neighborhood-serving’ areas:
5. Midtown
6. Charleston shopping Center.
This ‘Diagnostic,’ phase two of the contracted project, comprehensively analyzes the City’s
current condition through four areas. The full diagnostic is included as Attachment A to this
report and will be discussed in greater detail by Streetsense on February 13, 2023. A summary
1 City Council Staff Report November 2, 2022 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/agendas-minutes/city-council-agendas-minutes/2022/20221107/20221107pccsm-amended-linked-q.a-
2.pdf#page=8
2 Presentation From November 2, 2022 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/item-presentations/2022/20221107/20221107pptccsm-item-2.pdf
3Video From November 2, 2022 https://www.youtube.com/live/VdBcadUd_Fc?feature=share&t=945
4 Summary minutes From November 2, 2022 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/agendas-minutes/city-council-agendas-minutes/2022/20221114/20221114smccsm.pdf
Item No. 2. Page 3 of 6
of highlights is below; the full Diagnostic concludes with findings and guiding principles on slide
62.
1. Market Assessment (begins on Streetsense slide 13)
a. Competition Assessment
b. Retail Demand Assessment
2. Business Environment (begins on Streetsense slide 26)
a. Sales Tax Analysis
b. Hospitality/Tourism Assessment
3. Administrative Assessment (begins on Streetsense slide 37)
a. Regulatory Framework
b. Organizational Capacity and Stewardship
4. Physical Assessment (begins on Streetsense slide 48)
a. City-Wide Connectivity and Accessibility
b. District SWOT Analysis
1. Market Assessment
Market Assessment reviews retail uses and groups them into Neighborhood Goods and Services
(includes grocery stores, neighborhood markets, dry cleaners, barber shops, and others), Food
and Beverage (includes restaurants, bars, cafes, and others), and General merchandise, apparel,
furniture and other (includes apparel stores, clothing stores, hardware stores, sports stores,
and others). Non-retail uses, such as financial, educational, religious, or governmental
institutions are not factored into the retail demand model.
Competition Assessment: Streetsense has measured retail competition for Palo Alto on two
levels; Convenience, access, visibility, tenant quality, and a variety of offerings are all factors
that inform the assessment of market influence by each retail competitor.
•Locally-Serving neighborhood centers for convenience-based trips: Palo Alto faces strong
competition for groceries and has a number of big-box retailers clustered along the
periphery of City limits in neighboring jurisdictions.
•Regionally-serving destination hubs for experience-based trips: the City faces
competitive downtown environments in nearby cities as well as traditional malls.
Additionally, there is competition even within Palo Alto with University Avenue,
Stanford Shopping Center, and, to some extent, California Ave. all operating as regional
hubs.
Annual retail rents and vacancies in Palo Alto based on Streetsense’s analysis:
•Retail rents are high, with rental rates 80% higher than the national average of $27.55
per Square Foot. Stanford Shopping Center is the most expensive ($77.48/sf), followed
closely by University Ave ($76.68/sf) and Town and Country ($72.00/sf).
•Overall retail vacancy rate in Palo Alto was about 8% at the end of 2022; University
Avenue is estimated to be running a 10% vacancy rate in retail space and California Ave.
Item No. 2. Page 4 of 6
was higher at 15% vacancy. The National Average is 6.5% retail vacancy for the same
period.
Retail Demand Assessment: Streetsense’s market assessment looked at the demand for retail in
Palo Alto. As the City continues to navigate the transition from COVID-19 pandemic, the level of
retail demand is an important factor in developing a comprehensive economic development
strategy. Through Streetsense’s analysis, they concluded that:
•Hybrid work has reduced the demand for retail in Palo Alto by more than 100,000
square feet (roughly equivalent to the amount of combined retail space at Midtown and
Charleston Shopping Centers).
•Retail demand will steadily increase, especially as new developments continue in the
region, but according to their calculations the demand will not catch up to the existing
retail supply for more than 10 years.
2. Business Environment
As a subcontractor to Streetsense, HdL conducted a sales tax analysis as part of examining the
local business environment. Streetsense also examined the current state of the City’s hotels
and visitors through its Hospitality/Tourism Assessment.
Sales Tax Analysis: HdL found that small and locally owned business were the hardest hit
during COVID-19, with restaurants, retailers, and personal service providers being particularly
impacted. Highlights of HdL findings include:
•Local businesses are still not back to pre-pandemic cash flow nor revenue margins,
however sales tax has increased from pandemic lows. This suggests that inflation, labor
shortages, and other disruptions continue to adversely impact these vulnerable
businesses.
•Declines in sales tax revenues were occurring before the pandemic, which may be an
indicator of broader trends that were at work and then worsened by the COVID-19
pandemic.
•Palo Alto’s downtown areas of University and California Avenue have had the slowest
sales tax recoveries from the COVID-19 pandemic, while Stanford Shopping Center and
Town and Country Village have better recovered.
•Neighborhood Goods and Services were the least affected by the pandemic from a sales
tax perspective. This category makes up only 4% of total sales tax for the six focus
districts of the study (2% of Citywide Sales Tax), and therefore its resilience was not
impactful to overall revenues. Additionally, Palo Alto has the lowest sales dollar per
capita for Neighborhood Goods and Services businesses compared to neighboring
cities.
Hospitality/Tourism Assessment: found that Palo Alto’s lodging sector was recovering
consistent with the national pace. However, since the largest contributors to occupancy are
Item No. 2. Page 5 of 6
medical, education, and business travelers, this sector remains vulnerable in the face of
recession concerns.
•Weekday occupancy of hotels is showing signs of improvement.
•Even prior to the COVID-19 pandemic, hotels in Palo Alto historically had higher vacancy
rates over the weekends. This suggests that growing weekend occupancy rates with
non-business travelers may be an area for further work.
3. Administrative Assessment
Streetsense also looked at various elements of the City to inform the Administrative
Assessment including a review of the regulatory environment and understanding the ecosystem
of partner organizations to inform organizational capacity and stewardship.
Regulatory Assessment: Recent trends in retail and changing work patterns may warrant
revisiting certain sections of Palo Alto’s zoning code; Streetsense noted in particular the highly
regulated environments of Downtown and California Avenue. In contrast, Stanford Shopping
Center and Town & Country Village provide centralized ownership resulting in more flexibility
and clarity around what is allowed and what is not allowed to aid tenants.
Organizational Capacity and Stewardship: When Streetsense examined the ecosystem of
partner organizations, they found that the City has different arts, culture, and entertainment
organizations that provide options at both a City level and at a district level. However, there is a
lack of partner organizations to help serve as stewards and partners in economic development
for California Ave and University Avenue.
4. Physical Assessment
Streetsense included some of their preliminary thoughts on the Physical Assessment of Palo
Alto when they discussed the project with City Council on November 7, 2022. This work was
expanded as the fourth component of the diagnostic.
Accessibility and Connectivity: Streetsense explored the accessibility and connectivity of the
City’s roadway and transit networks. Some important gaps identified by Streetsense are already
in the process of being addressed, notably the areas of grade separation and on-demand
shuttle service to help improve transit access.
Focus Area SWOT Analysis: Streetsense performed a Strengths, Weaknesses, Opportunities, and
Threats (SWOT) analysis of the physical infrastructure for Downtown, California Avenue,
Stanford Shopping Center, Town and Country, Midtown, and Charleston Shopping Center. This
analysis looked at access/connectivity, parking, wayfinding/signage, sidewalks and street
furniture, gathering spaces and building. This analysis is presented in Attachment A; positive
attributes in each area are highlighted in green and areas for improvement are highlighted in
red.
Guiding Principles for Drafting of Comprehensive Economic Development Strategy
Item No. 2. Page 6 of 6
Through the Diagnostic, Streetsense has developed their ‘guiding principles’ that will be used to
help address the third and final phase of the project, which is the creation of a comprehensive
Economic Development Strategy through recommendations.
The guiding principles developed by Streetsense are:
•Reinforce hierarchy of place
•Improve accessibility
•Adopt policies that reflect changing market conditions
Discussion of the guiding principles and the City Council feedback and consensus of priority
principles will be an important part of the study session on February 13, 2023. This discussion
will directly impact the third and final stage of this project, the drafting of a comprehensive
Economic Development Strategy with recommendations for future actions.
FISCAL/RESOURCE IMPACT
The discussion on February 13 is not expected to affect immediate resource needs, the
resources allocated to Economic Development are an important consideration for ongoing
work. The City has ongoing funding for the Economic Development coordinator role and some
ongoing funding for limited consultant support (less than $25,000 annually).
As the City refines the scope of its economic development function through Streetsense’s work,
scaling resources to align with that scope will require further resources and budgetary actions.
Staff will work with Streetsense to develop proposals that appropriately scale the City’s
economic development function to align with Council’s feedback throughout the process and
will return with proposals for consideration through the development of the FY 2024 budget.
STAKEHOLDER ENGAGEMENT
Community stakeholders, including residents and representatives from various business
sectors, including restaurants, retailers, hoteliers, property owners, and others, have been
engaged consistently through the City’s recent work on economic development. As the City
transitions out of the pandemic, staff will continue to engage residents and businesses in
meaningful dialogue to help inform and maintain the City’s economic vibrancy.
ENVIRONMENTAL REVIEW
Holding a study session on economic development will not directly or indirectly cause physical
changes to the environment and therefore this study session is not a project under the
California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A: Streetsense Diagnostic
APPROVED BY:
Ed Shikada, City Manager
Report #: 2302-0915
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DRAFT FOR INTERNAL REVIEW ONLY
PALO ALTO
ECONOMIC DEVELOPMENT
STRATEGY
DIAGNOSTIC
PHASE 2 DELIVERABLE
PREPARED FOR PALO ALTO, CA
FEBRUARY 13,2023
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v
TABLE OF CONTENTS
01 PROJECT OVERVIEW
02 STUDY AREAS
03 MARKET ASSESSMENT
04 BUSINESS ENVIRONMENT
05 ADMINISTRATIVE ASSESSMENT
06 PHYSICAL ASSESSMENT
07 GUIDING PRINCIPLES
08 APPENDIX
CONTACT
Larisa Ortiz
Managing Director
Streetsense
lortiz@streetsense.com
641 S ST NW
WASHINGTON,DC 20001 STREETSENSE.COM
@REALSTREETSENSE
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01
PROJECT
OVERVIEW
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PROJECT TIMELINE
We are here
IMMERSION &DISCOVERY
•Kick off session
•Field work
•Stakeholder engagement
•Focus groups and interviews with business
owners, hotel operators, residents, City Staff
•Council presentation
DIAGNOSTIC
•Retail market analysis
•Administrative capacity assessment
•Business environment assessment
•Physical assessment
•Coordination with California Ave/Ramona St
Consultant
•Council presentation
ECONOMIC DEVELOPMENT
STRATEGY
•Draft work plan development
•Final work plan development
Before advancing to a discussion of strategic interventions, the Diagnostic phase of this exercise
ensures that we share a collective understanding of the challenges at hand. This milestone is important
to establish consensus for action and precedes a discussion of recommendations that will be led or
supported by public sector investments, policies and programs.
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5
PHYSICAL ENVIRONMENT
→City-Wide Connectivity & Accessibility
→District SWOT Analysis
Phase 1–2:
IMMERSION &DISCOVERY/DIAGNOSTIC
TODAY’S PURPOSE
•Present and Discuss Diagnostic Findings
•Confirm alignment on key take aways and
guiding principles before advancing to
recommendations
BUSINESS ENVIRONMENT
→Sales Tax Analysis
→Hospitality/ Tourism Assessment
ADMINISTRATIVE CAPACITY
→Regulatory Framework
→Organizational Capacity & Stewardship
MARKET ASSESSMENT
→Competition Assessment
→Retail Demand Assessment
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Phase 1–2:
IMMERSION &DISCOVERY/DIAGNOSTIC
A FRAMEWORK FOR SUCCESSFUL RETAIL PLACES
MANAGED
…with leadership
and capacity to
engage merchants
and property
owners and
implement
improvements
SAFE
…but more
importantly
perceived as safe
ACCESSIBLE
…to a customer base
…with little friction
for arrival/departure
regardless of mode
VISIBLE
…by potential
customers either
as they drive,
bike or walk by
CHAMPIONED
…with demonstrated
signs of maintenance
and investment
ANCHORED
…by retail
destination driver(s)
… by culture,
institutional or
entertainment uses
PEDESTRIAN
FRIENDLY
…co-located
businesses that
encourage cross
shopping
…walkable and
with few
disruptions in
continuity
BRAND
RESONANCE
…with clear
branding strategy
and identity
Beloved, "best-in-class" streets share characteristics that correlate to successful economic
development outcomes, including but not limited to community satisfaction, business
profitability, and contribution to the municipal tax base. Based on the over three decades of
research, these characteristics include:
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Phase 1–2:
IMMERSION &DISCOVERY/DIAGNOSTIC
THE RETAIL ECOSYSTEM
•Perspectives range among key stakeholders
•Priorities unique from one another
•Highly symbiotic relationship structure
Retail viability deteriorates when a given stakeholder's
priorities and needs are not being met.
TENANT
Confidence in Sales
Rent Commensurate with
Sales
Co-tenancy
Brand Alignment
LANDLORD/
MANAGEMENT
Return on Investment
Tenant Stability
Risk Mitigation
CONSUMER
Sense of Place
Tenants
Events | Community
Safety | Cleanliness
Accessibility | Convenience
Value (Money & Time)
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Phase 1–2:
IMMERSION &DISCOVERY/DIAGNOSTIC
THE RETAIL ECOSYSTEM
Where does the public sector play a role in influencing
or directing the actions of key stakeholders?
PUBLIC SECTOR TOOLS
•Regulatory framework influences co-tenancy
•Financial incentives can help mitigate risk
•Funding and coordination of events to build community
•Investments in enhanced safety/cleanliness
•Improvements to access/convenience
•District marketing & branding campaigns
•Investments in public realm to improve sense of place
TENANT
Confidence in Sales
Rent Commensurate with
Sales
Co-tenancy
Brand Alignment
LANDLORD/
MANAGEMENT
Return on Investment
Tenant Stability
Risk Mitigation
CONSUMER
Sense of Place
Tenants
Events | Community
Safety | Cleanliness
Accessibility | Convenience
Value (Money & Time)
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SMALL STORE FOOTPRINTS BUY ONLINE, PICK-UP IN STORE (BOPIS)
GUIDESHOP MODEL MICRO-FULFILLMENT COMPONENTS
•Changing retail footprints
•Changing spending patterns
•Tenants are in the driver's seat
•Implications of hybrid work
GLOBAL AND NATIONAL
TRENDS
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02
STUDY AREAS
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MAP
All 6 districts
The diagnostic focuses on areas within Palo Alto where
this is an existing concentration of retail activity.
STUDY
AREAS
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Using shopping center industry classifications, Palo Alto has
three (3) categories of shopping districts as follows:
REGIONAL/SUPER-REGIONAL CENTERS
•most significant tax base contributors
•face the greatest competition for visitors within the region
•must maintain "best-in-class" status to remain competitive
COMMUNITY-SERVING CENTERS
•moderate tax base impacts
•local promotion and marketing strategies, if any
•tend to benefit from activations that meet
community interests and needs
NEIGHBORHOOD-SERVING
•minimal tax base impacts
•least affected by COVID, typically the most stable
asset class
•local customer base with little need for promotion
DEFINING PALO ALTO'S
"SHOPPING DISTRICTS"
DISTRICT
DESTINATION
DRIVERS
ICSC
CATEGORIZATION RETAIL SF
NO.SALES
TAX
PRODUCING
BUSINESSES
TRADE
AREA
Downtown/
University
Ave
F&B,
Entertainment,
Fashion &
Apparel
Regional
(400k –800k)916,400 432
Primary,
Secondary
Tertiary
Stanford
Shopping
Center
Department
Stores, Fashion &
Apparel
Super Regional Mall
(800+ sf)1,348,000 151
Primary,
Secondary
Tertiary
California
Ave
Specialty Grocer,
F&B, Farmer's
Market, Fitness
Community/
Neighborhood
Center
(125k –400k sf)
202,500 99 Primary,
Secondary
Town &
Country
Village
Grocery,
Pharmacy, F&B
Community Center
(125k –400k sf)171,000 59 Primary,
Secondary
Midtown
Grocery,
Pharmacy, Quick
Service F&B
Neighborhood
Center
(30k –125k sf)
52,000 42 Primary
Charleston
Shopping
Center
Specialty Grocer
Neighborhood
Center
(30k –125k sf)
46,000 10 Primary
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→METHODOLOGY &APPROACH
→COMPETITION ASSESSMENT
→RETAIL DEMAND ASSESSMENT
03
RETAIL MARKET
ASSESSMENT
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Retail market assessment:
INDUSTRY TERMINOLOGY
Given their extraordinary nuance,
ancillary tenants (e.g. financial,
educational, religious, governmental
institutions, etc.) and entertainment
establishments (e.g. arcades, movie
theaters, bowling alleys, escape
rooms, etc.) are considered to be
non-retail uses and are not factored
into the retail demand model or
included in retail demand
calculations.
Neighborhood
goods &
services
(NG&S)
Food &beverage
(F&B)
General
merchandise,
apparel, furniture,
and other
(GAFO)
•Grocery store
•Neighborhood market
•Pharmacy/drug store
•Dry cleaner/laundromat
•Tailor/seamstress
•Nail/hair salon
•Barber shop
•Spa
•Fitness
•Gyms
•Sit-down restaurant
•Full-service restaurant
•Fast-casual restaurant
•Fast food restaurant
•Carry-out restaurant
•Ice cream shop
•Coffee shop
•Café
•Apparel store
•Clothing store
•Electronics store
•Furniture store
•Pet store
•Sports store
•Book store
•Music store
Non Retail Uses
Retail Uses
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COMPETITION
ASSESSMENT
Given the urban-suburban typology of the Palo Alto market,retail competition for the site is measured on two levels –
locally-servingneighborhoodcentersfor convenience-based tripsand regionally-serving destination hubs for experience-
based trips.Retail customer behaviors are rooted in convenience,access,and visibility as well as tenant quality
and variety of offerings.Thesefactorsare consideredwhenassessingthemarket influenceof each retail competitor.
1/27/2023 DRAFT
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Retail market assessment:
REGIONAL RETAIL COMPETITION
TAKEAWAYS
•Downtown retail environments are
highly competitive.
•Two competing downtown
environments within Palo Alto,
University Ave and California Ave,
spreading retail thin.
•Traditional malls are less prevalent
to the west.There are five regional
malls of varying quality closer to San
Jose.Hillsdale Shopping Center is the
only traditional mall to the west.The
top performing mall in the region is
Stanford Shopping Center.
Regionally-serving, experience-based retail
centers are characterized by a dominant mix
of good-based retail, including malls, power
centers, and walkable downtowns and
lifestyle centers. These retail centers attract
customers from a larger regional trade area
and feature a cluster of full-service
restaurants and entertainment.
Source: Streetsense analysis Q4 2022.
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Retail market assessment:
LOCALLY-SERVING RETAIL
COMPETITION
TAKEAWAYS
•Grocery competition is strong throughout the
region.
•Big box retailers are not allowed in Palo Alto
by regulation. However, they are
concentrated along the periphery of Palo
Alto, cannibalizing the retail offering
within the city.
•Target and Costco are particularly prevalent
in the region, with nine and seven stores,
respectively within the examined area.
Neighborhood serving retail centers are character
ized by a dominant mix of Neighborhood Goods
& Services tenants, often grocery-anchored.
These retail centers primarily meet the need for
convenience-based shopping trips, competing on
a geographically smaller scale.
Source: Streetsense analysis Q4 2022.
1/27/2023 DRAFT
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Retail market assessment:
PALO ALTO RETAIL DISTRICT STACKUP –ASKING RENTS
Retail rents in the region are high. The average asking rent in Palo Alto is
$63.52 per SF –80% higher than the national average of $27.55 per SF.*
Stanford Shopping Center has the highest average asking rents in Palo Alto.
However, average asking rents within Town and Country Village and
University Ave are comparable, with rents along University Ave reaching up
to $99.00 per SF.
Disparity between average asking rents of the two downtown environments in
Palo Alto, is a reflection of the higher quality environment and regional pull of
University Ave.
Source –REIS, Loopnet, Michael Baker, CoStar 2022
* National average asking rent for malls and other retail environments, not
including strip centers, neighborhood serving centers, and power centers as of
Q4 2022.
TAKEAWAYS
•According to local brokers, there is a perception that asking rents along
University Ave are highly elevated and do not reflect the state of the
retail market, which greatly favors tenants over landlords
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Retail market assessment:
RETAIL VACANCY
Vacancy among the six retail districts totals 243,000 SF, or about 8%
vacancy rate as of year-end 2022.
•Majority of vacant space is concentrated along University Avenue,
accounting for about 88,000 SF.
•California Avenue has the highest vacancy rate among all districts at
15%, accounting for 31,000 SF.
•There is about 57,000 SF currently vacant within Stanford Shopping
Center, which equates to a very low vacancy of 4%, due to the mall's
large size. This vacancy is caused by smaller tenants inside the mall
rather than by the loss of any major anchors.
Source: Loopnet, REIS, Michael Baker
*Q4 2022 Moody's Analytics
TAKEAWAYS
•Retail is being spread thin by a finite consumer base within Palo Alto
•Stanford Shopping Center cannibalizes retail in other districts within Palo Alto,
offering attractive co-tenancy opportunities and retail-appropriate spaces.
Vacancies are exacerbated by University Avenue’s high rents and less desirable
retail spaces, often in need of tenant improvement investments.
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RETAIL DEMAND
ASSESSMENT
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Retail market assessment:
TRADE AREAS
Based on the competitive landscape, natural and
psychological boundaries, travel patterns, and
population trends, Streetsense defined the
following trade areas:
PRIMARY TRADE AREA
Users:Palo Alto residents, employees, students,
overnight guests, and daytime visitors
Frequency:High -at least once or twice per
week
Purpose:Convenience-based shopping and
dining
SECONDARY TRADE AREAS
Users:Nearby residents (Mountain View, Los
Altos, Melo Park, Redwood City)
Frequency:Modest -once or twice every two
weeks
Purpose:Change up from options closer to
home, work, or school
TERTIARY TRADE AREAS
Users:Regional residents (San Mateo, San
Bruno, Burlingame, Sunnyvale, Santa
Clara/Western San Jose, Fremont, Newark)
Frequency: Low -once or twice every month
Purpose:Experience-based shopping and dining
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Retail market assessment:
SHIFTS IN DEMAND POST-COVID
114,826
Total employees working within Palo Alto
69,889
Non-office-based employees working within Palo Alto
44,937
Office-based employees working within Palo Alto
37% of office-based employees are going into an office (San Jose metro area)
In Palo Alto, hybrid work has reduced the demand for retail by over 100,000
SF, roughly equivalent to the amount of retail space at Midtown Shopping
Center and Charleston Shopping Center combined.
Resident -generated
demand
697,275 SF
Resident-generated
demand
697,275SF
Visitor-generated
demand
147,605 SF
Visitor-generated
demand
147,605 SF
Employee-generated
demand
452,085 SF Employee-generated
demand
340,620 SF
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
PTA Demand - No Remote Work PTA Demand - Adjusted for Work from Home
PTA Retail Demand Hybrid Work Scenario -2022
-111,465
SF of lost
retail
demand
TAKEAWAYS
•Palo Alto's daytime population can no longer support the same level of retail it did
pre-covid,with fewer on shoppers coming from Stanford Research Park and other
office-centric areas to generate foot traffic during the work week
•Shifts in daytime population and the balance between residents and employees
require a right-sizing of retail
Source: Sitewise, 2022; Bureau of Labor Statistics 2022; Kastle Systems 2022.
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Retail market assessment:
DEVELOPMENT PIPELINE
Significant development pipeline in the
surrounding markets.
At full build out, these projects will add
17,700 residential units
15.8 million SF of office/life science space
2,300+ hotel keys
* Map shows multi-family residential developments over 50
units and office/life sciences developments over 25,000 SF
TAKEAWAYS
•Menlo Park, Redwood City, and Mountain
View have robust office/life science pipelines,
growing density and building future daytime
populations.
•Fueling the retail ecosystem -density and
daytime populations drive retail spending,
thereby growing retail demand.
•Retail in districts like California Ave would
benefit from increased density and daytime
populations
Source: Moody's Analytics, 2022.
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Retail market assessment:
RETAIL DEMAND PROJECTIONS
Based on resident, employee, overnight guest, and daytime visitor
spending, local and regional competition, and projected population
growth, the site can support the following:
2,571,970 SF
Total retail demand in 2022
2,627,980 SF
Total retail demand in 2027
2,687,030 SF
Total retail demand in 2032
3,032,900 SF
2,571,970 SF 2,627,980 SF 2,687,030 SF
Supply 2022 Demand 2027 Demand 2032 Demand
Retail Supply and Demand Projections
460,930 SF
oversupply
TAKEAWAYS
•Retail needs to be right-sized --Retail demand will steadily increase
however, without intervention, demand will not reach parity with the existing
retail supply over the next 10 years
•Oversupply > vacancy, indicating that vacancy will continue to rise among
lower quality or poorly positioned space
•Potential interventions to the retail ecosystem –
•Broadening the mix of uses to increase daytime customer base
with office and residential uses
•Supplementing with non-traditional retail uses like entertainment,
civic, and cultural uses to activate the ground plane
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Retail market assessment:
DEMAND BREAKDOWN
By 2032, total retail demand can be broken out into the
three major retail categories :
•Neighborhood goods & services (NG&S) –15% of
total retail demand
•Food & Beverage (F&B) –22%of total retail
demand
•General merchandise, apparel, furniture, and other
(GAFO) –63%of total retail demand
TAKEAWAYS
•General merchandise uses makes-up more than half of
demand, driven by Stanford Shopping Center, which
consumes 80% of that demand, with a remaining 321,730 SF
of general merchandise demand to be distributed among the
other districts
•Neighborhood-serving retail demand is constrained by the
presence of big box retailers, considered ”category killers” in
the region. However, given the population density and high
spending levels, the market may be able to support additional
neighborhood-serving retail on a small scale.
•Healthy demand for food & beverage, both fast casual serving
student and employee populations, as well as full-service
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04
BUSINESS
ENVIRONMENT
→SALES TAX ANALYSIS
→HOSPITALITY/ TOURISM ASSESSMENT
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SALES TAX
ANALYSIS
→NATIONAL AND LOCAL SALES TAX REVENUE TRENDS
→FOCUS AREA SALES TAX REVENUES
→COMPETING CITIES
→KEY TAKEWAYS
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Business environment:
NATIONAL & LOCAL SALES TAX REVENUE TRENDS
The graphic above is representative of sales tax revenues by Fiscal Year for all sales tax producing
businesses in Palo Alto
NATIONAL SALES TAX TRENDS
Small, locally owned businesses were the hardest hit during the COVID-19 Pandemic, particularly
restaurants,retailers and personal service providers.Sales Tax revenues are mostly back to pre-pandemic
(FY 2018-19) numbers by the end of FY 2021-22, but many small,locally owned businesses are not back
to pre-pandemic cash flow and required revenue margins.
Common economic influences / macro conditions forcing increased cost of doing business across tax
generating groups include:
•Inflation and increasing costs of doing business, such as high labor and raw material costs (by
December 2022, the Consumer Price Index for All Urban Customers (CPI-U) in the U.S.
increased by 6.5% for the prior 12 months)
•Supply chain and manufacturing disruptions
•Employment/ labor shortages
•Shift to online shopping
•COVID-19 safety protocols and compliance
•Interest rates rising
PALO ALTO SALES TAX
Total sales tax revenues are bouncing back from the Pandemic. Palo Alto’s total FY 2021-22 sales tax
revenues increased by 20% from the FY 2020-21. However, FY 2021-22 revenues were still 6% below
pre-pandemic sales tax in FY 2018-19.CPI-U for the San Francisco Area increased by 4.9% from the 12
months prior to December 2022. Food prices alone advanced 10.2% for the two months ending December
2022.
Note: The dollar amount listed for sales tax revenue here forward represent the 1% sales tax revenue issued to the City of Palo Alto
Sources: HdLCompanies; bls.gov
Even though sales tax appears to be increasing from the Pandemic,
local businesses aren’t back to pre-Pandemic cash flow and revenue margins.
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Business environment:
FOCUS AREA SALES TAX REVENUES BY FISCAL YEAR
Sales tax revenues in the neighborhood centric areas, Charleston and
Midtown, were the least impacted during the Pandemic. Neighborhood focused
areas produce a low amount of sales tax relative to the other shopping areas and
there is a higher volume of essential stores like grocery stores, markets,
pharmacies, etc.Combined, Charleston and Midtown Shopping Centers made up
about 1% of the City's total sales tax revenue in FY 2021-22.
University Ave, which makes up 12% of total sales tax revenue in the City, has
experienced decreasing sales since before the Pandemic.University Ave has been
the slowest to recover from the Pandemic & sales are still not above pre-
Pandemic levels. University Avenue FY 2021-22 sales tax revenues are 25%
below pre-Pandemic FY 2016-17 sales.
California Avenue makes up 2.2% of total sales tax in the City. Sales tax on
California Avenue is 12.8% below pre-Pandemic sales in FY 2018-19, and still 9%
below FY 2016-17.
Town and Country Village experienced a 21% decrease in sales tax in FY 2019-20,
though the shopping area is recovering from the Pandemic. Town and Country
Village sales tax makes up 3% of the total sales tax revenue in Palo Alto for FY
2021-22.
Stanford Shopping Center is the largest and most resilient sales tax producer
of the six focus areas.While Stanford Shopping Center sales decreased during the
Pandemic, FY 2021-22 sales were 25% above pre-Pandemic FY 2016-17 sales tax
revenues. Stanford Shopping Center makes up 25% of total sales tax revenue,
mainly from retail sales.
Source: HdLCompanies
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
M
i
l
l
i
o
n
s
Sales Tax Revenues for Fiscal Years 2016-17 to 2021-22
Charleston Shopping Center Midtown Shopping Center California Ave
Town and Country Village Downtown Palo Alto Stanford Shopping Center
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Business environment:
NG&S –Neighborhood Goods & Services
NG&S makes up 4% of total sales tax revenue for the six focus districts (2% of total
sales tax for the City of Palo Alto).Most NG&S businesses are not big sales tax
producers (I.e., personal services, grocery stores, gyms). For example, Grocery Store
taxable sales are roughly 25-30% of their total sales.Charleston and Midtown
Shopping Centers show the highest percentage of NG&S relative to the total sales tax
revenue in those shopping districts (40% and 54%, respectively).
F&B –Food & Beverage
F&B makes up 27% of total sales tax revenue for the six focus districts (11.4% of total
sales tax for the City).University Ave produces the highest value of F&B sales tax
revenue, likely due to the higher concentration of restaurants compared to the other
focus areas.
GAFO –General Merchandise, Apparel, Furniture, Other
GAFO makes up 58% of the total sales tax revenue for the six focus districts (24% of
total sales tax for the City).Retail sales produce the largest amount of sales tax
revenue.Stanford Shopping Center and University Avenue combined make up 95% up
GAFO sales tax for the six focus areas ($5.1M and $1.1M, respectively).
NON-RETAIL
Non-retail sales tax revenue in the six focus areas include automotive sales, automotive
rentals and repairs, business services, medical/biotech businesses, and textile and
furnishings.Non-retail makes up 11.4% of total sales tax revenue for the six focus
districts (4.8% of total sales tax for the City).
FOCUS AREA SALES TAX REVENUES BY RETAIL CATEGORY FISCAL YEAR 2021-22
District Number of
Businesses*NG&SF&BGAFONon RetailTotals
Charleston
Shopping Center10$36,161$23,525$30,590-$90,276
Midtown 42$109,320$74,929$6,305$11,397 $201,951
California Ave99$56,322$437,306$38,449$58,149 $590,226
Town and Country
Village59$87,101$328,968$274,874$3,237 $694,180
University Avenue432$147,868$1,640,977$1,118,451$291,371 $3,198,667
Stanford Shopping
Center151$5,980$574,954$5,063,008$934,975 $6,578,917
Totals793$442,752$3,092,536$6,531,677$1,299,129 $11,354,217
*Number of businesses is only representative of those that are sales tax producing. Non sales tax producing
businesses that are not accounted for in this table may include offices, medical centers, certain business and personal
services, and certain fitness centers or gyms.
Ranked in order of lowest to highest sales tax revenue producing for FY 2021-22
Source:HdLCompanies
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Business environment:
KEY TAKEAWAYS
Palo Alto is the largest sales tax producer
compared to the competing cities identified here,
largely due to GAFO and Non-Retail sales tax
revenues.
GAFO is dominated by Stanford Shopping
Center's sales tax revenue, which makes up 90%
of total GAFO sales at $6.6 million for FY 2021-
22. Non-retail-sales mostly come from auto and
transportation related businesses (12 of which are
in the top 100 sales tax producing businesses in
the City).
Palo Alto is lacking in NG&S businesses in
comparison to Redwood City,Mountain View and
Menlo Park.
Palo Alto's F&B sales tax revenue is second
behind the City of Mountain View.
COMPETING CITIES: TOTAL SALES TAX REVENUE FISCAL YEAR 2021-22
$27,060,912
$19,778,575
$18,795,098
$11,780,240
$5,390,935
$2,458,455
Source: HdLCompanies
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Business environment:
NG&S –Neighborhood Goods & Services
Palo Alto residents are likely shopping for neighborhood goods and services in
competing areas.Palo Alto has the lowest NG&S SDPC, even lower than
Burlingame and Los Altos who bring in less NG&S sales tax revenue compared
to Palo Alto.Menlo Park has the highest SDPC in the NG&S category even
though Redwood City and Mountain View receive a significantly higher amount
of NG&S sales tax revenue.
F&B –Food & Beverage
Palo Alto is doing better than most competing cities in bringing people to the
City for F&B, including Menlo Park, Redwood City, and Los Altos. Burlingame
and Mountain View have slightly higher SDPC for F&B.
GAFO 0 General Merchandise, Apparel, Furniture, Other
Palo Alto has the highest SDPC in the GAFO category, largely due to the
Stanford Shopping Center.
NON-RETAIL
Palo Alto is likely bringing consumers from outside the area to shop for non-
retail sales tax producing goods and services, like auto and transportation
businesses, as well as from the Stanford Research Park.Burlingame has the
highest SDPC in non-retail sales, which likely comes from the auto and
transportation industry (new and used car sales, rentals, repairs, etc.).
COMPETING CITIES: RETAIL SALES DOLLAR PER CAPITA (SDPC) FISCAL YEAR 2021-22
SDPC is a macro approach to identify possible trends within a city or region regarding to spending habits.Average SDPC is derived by multiplying out the 1% total point of sales tax dollars and then dividing
them by the population size of their community.
•Below Average: Suggests resident do some shopping outside of the area; lack of local supply by preferred retailer and restaurant concepts
•Above Average: Suggest consumers from outside the area are attracted to the local retail market; have preferred retailer and restaurant concepts.
Source: HdL Companies
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Business environment:
KEY TAKEAWAYS
Palo Alto’s University and California Avenues are not
recovered and back to pre-Pandemic FY 2016-17 sales tax
revenues.
Most competing downtowns, excluding Mountain View’s
Castro Street, have exceeded their FY 2016-17 sales tax.
Despite the slow recovery, University Ave produces the most
sales tax revenue compared to the competing downtowns
identified here.
California Ave sales tax revenue is more comparable to Los
Altos Downtown in terms of sales tax revenue (Note: While
sales tax may be comparable, there is a clear difference in
terms of ownership and management when comparing
California Avenue to Downtown Los Altos).
COMPETING DOWNTOWNS: SALES TAX REVENUES FISCAL YEAR 2021-22
Source: HdLCompanies
California Ave Los Altos
Downtown
Menlo Park
Downtown
Mountain View
Downtown
Redwood City
Downtown
Burlingame
Downtown University Ave
FY 2016-17 $649,364 $646,304 $1,264,170 $1,550,566 $1,948,910 $2,211,606 $4,245,314
FY 2021-22 $590,226 $801,157 $1,378,004 $1,422,879 $2,315,975 $2,724,840 $3,198,667
$0.65 $0.65
$1.26
$1.55
$1.95
$2.21
$4.25
$0.59
$0.80
$1.38 $1.42
$2.32
$2.72
$3.20
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
M
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Competing Downtown Sales Tax Revenues
Fiscal Year 2016-17 compared to 2021-22
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Business environment:
Total sales tax revenues are bouncing back from the Pandemic, but recovery from the COVID-19 Pandemic is uneven across key tax
generating districts and the local economy is not fully recovered.
•Fiscal year 2021-22 sales tax revenues Midtown and Charleston Shopping Centers, California Avenue, and University Avenue are below FY 2016-17 sales.
•Palo Alto's downtown areas (University Ave and California Ave) have had the slowest recovery following the COVID-19 Pandemic.
•University Ave has been in a decline since pre-Pandemic, for at least the last five years.
•Stanford Shopping Center &Town and Country Village have been able to better maintain sales tax revenue compared to other areas of the city. Both shopping
centers have a central management team, which may contribute to the success of their businesses.
•Shopping Center is a regional attraction that brings consumers in from all throughout the Peninsula;it's the largest sales tax producer in Palo Alto and when
compared to GAFO sales tax in competing cities.
•Palo Alto has the highest sales tax revenue compared to competing cities, largely as a result of GAFO sales (Stanford Shopping Center)and non-retail sales (from
auto & transportation related businesses).
•Neighborhood goods and service (NG&S) businesses appeared to be the least impacted by the Pandemic in terms of sales tax revenue, however NG&S business
types produce the least amount of sales tax revenues.
•The comparative analysis showed that Palo Alto has the lowest sales dollar per capita for NG&S businesses and compared to competing cities.
While sales tax recovery is important, it's not a true reflection of recovery and profitability of small businesses that are still struggling with
cash flow and margins from the Pandemic.
KEY TAKEAWAYS
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HOSPITALITY/
TOURISM
ASSESSMENT
→LODGING
→VISITORS
→OPPORTUNITIES
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Business environment:
HOSPITALITY/TOURISM: LODGING
BARRING RECESSION, FULL RECOVERY BY 2023*
Palo Alto’s lodging industry is recovering at the national pace and is
currently approaching 2019 levels. Palo Alto’s Occupancy Rate is
highest mid-week, slightly lower than either U.S. or California Average.
STABLE BUSINESS TRAVELER BASE
Palo Alto’s largest contributors to occupancy are medical, education and
business travelers who fill approximately 2,200 hotel rooms, including
about 300 via the two new Marriott properties.
RECESSION CONCERNS
Oxford Economics expects the US to enter a recession in the first half of
2023. This is an ominous prospect as travel spending falls by roughly
twice the rate of the economy in a typical recession.
Source: STR
Source: Tourism Economics
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Business environment:
HOSPITALITY/TOURISM: VISITORS
INTERNATIONAL
Lag in recovery from international
travelers will continue to impact Palo
Alto more than most cities.
Of particular note, Chinese visitors had
been the largest source of international
visitors to Palo Alto, and that nation’s
slow recovery lags all other major
inbound traveler sources to California.
BUSINESS
Less business travel as virtual meetings
grow.The transition to virtual meetings, caused
by the pandemic, generally worked well and
contributes to California's (and the U.S.') slower
business travel recovery. Cost savings
to businesses was meaningful, and lower
company carbon footprints was and remains
important to many.
Business travel and the related impact on Palo
Alto’s economy will eventually recover to pre
pandemic levels, but it will likely be different
than in the past, and in ways yet to be confirmed.
DOMESTIC LEISURE
Palo Alto is not a typical, overnight
tourist destination as it lacks
major destination attractions. However, there are
unique local destinations to be celebrate.
Palo Alto’s largest audience sector for
hospitality spending (restaurants, attractions,
shopping) and tax revenues is a combination of
residents and workforce.Its next largest
includes residents and workforces from neighboring
Bay Area communities,such as Mountain View,
Menlo Park, Sunnyvale, Redwood
City,Burlingame and Los Altos.
OPPORTUNITIES
•Incentivize longer business travel or
“Bleisure” travel
•Grow weekend occupancy rates with non-
business travel
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05
ADMINISTRATIVE
ASSESSMENT
→REGULATORY ASSESSMENT
→ORGANIZATIONAL CAPACITY & STEWARDSHIP
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REGULATORY
ASSESSMENT
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Administrative Capacity:
TAKING OUR CUE FROM THE COMPREHENSIVE PLAN
The existing 2030 Comprehensive Plan is the primary tool for
guiding preservation and development of Palo Alto.
There are three sections in the plan which provide economic
development directives...
•Business & Economics –"business friendly and thriving"
•Land Use –Updates to the municipal code that support a
"diversification of land uses", including "retail that caters
to daily needs of residents"; "stimulates housing near
retail"; and allows for the "conversion of non-retail
commercial FAR to residential FAR, where appropriate"
•Transportation –Improve Walkability & Bikability by
"improving connectivity between businesses, parking and
transit stops", including "public art in alleyways" to
encourage walking
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Administrative Capacity:
Municipal codes are often an accumulation of general
controls that were used to solve specific problems in
specific places including:
•Concerns over rising retail rents from use groups (i.e.
office, chain stores, storage facilities, etc.)perceived as
contributing to rent inflation for "more desirable" uses
•Conflicts between residents and industrial or
entertainment uses
•Rules that restrict uses with a low-income or
transient customer base, like laundromats
•Concerns over “bad actors”, like bars and dance clubs
ZONING CODE BASICS
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Administrative Capacity:
ZONING CODE BASICS
GROWTH IN ON-LINE
SHOPPING
Retailers are using stores for local distribution, which
may be restricted as “warehousing & distribution”
TECHNOLOGICAL
ADVANCES
Breweries,specialty food manufacturing and maker
spaces are restricted as “Manufacturing & Processing”
DEMOGRAPHICS AND
LIFESTYLE
Wellness and medical services are restricted as
“Medical Office”
Recent trends in retail and changing work patterns can render some sections of the Zoning
Code outdates, E.G.
Customer Pick-Up/Returns within Store
Urgent Care, Adams Morgan, Washington, DC
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Administrative Capacity:
OVERVIEW OF APPLICABLE ZONING CONTROLS GOVERNING USES
Each overlay delineates separate permitting and use requirements and can make it difficult for
an applicant to determine what rules apply.
DISTRICT BASE DISTRICT OVERLAY 1 OVERLAY 2 OVERLAY 3 OVERLAY 4 OVERLAY 5
CALIFORNIA
AVE
CC –Community
Commercial
Retail
Preservation
R –Retail
Shopping
P –Pedestrian
Shopping
PTOD –Cal Ave
Pedestrian and
Transit Oriented
Cal Ave Parking
Assessment
District
MIDTOWN &
CHARLESTON
SHOPPING
CENTER
CN –Neighborhood
Commercial
Retail
Preservation
GF –Ground
Floor
P –Pedestrian
Shopping
Special Regulations
governing proximity
to Residential
DOWNTOWN
(University Ave)
CD –Downtown
Commercial
Retail
Preservation
GF –Ground
Floor
P –Pedestrian
Shopping
DOWNTOWN
(Lytton)
CD –Downtown
Commercial
Retail
Preservation
P –Pedestrian
Shopping
TOWN &
COUNTRY
VILLAGE
CC –Community
Commercial
Retail
Preservation
STANFORD
SHOPPING
CENTER
CC –Community
Commercial
Retail
Preservation
H
i
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Administrative Capacity:
ZONING OVERVIEW: CALIFORNIA AVENUE
CrossFit –Restricted due to size. Typical SF 2k
–2,500k sf
Pottery Making –Restricted under Learning
Centers and/or Industrial
Drybar –Restricted under both Salon and Formula Ordinance
Pediatrician –Restricted under Medical Office
C C ( 2 )( R )( P )
Along California Avenue, many Retail and “Retail-Like” uses
face regulatory barriers to entry, including businesses with 10 or
more locations nationwide
CONDITIONAL USE PERMITS REQUIRED FOR:
•Beauty Salons exceeding 1,800 SF
•Nail Salons exceeding 1,800 SF
•Barber Shops exceeding 1,800 SF
•Fitness or Exercise exceeding 1,800 sf
•Learning Centers for Individual or Small Group Settings
•Laundry & Dry Cleaning
•Financial Services (Except Drive-In) on ground floor
•Medical Offices up to 5k only when fronting Cal Ave.
•Commercial Recreation Uses up to 5k only when fronting Cal Ave
•Formula retail (with more than 10 stores nationally)
UNMENTIONED AND THEREFOR NOT ALLOWED
•Light Industrial as accessory uses (i.e., maker spaces)
RESTRICTED GROUND FLOOR USE
•Residential
Fitness –Restricted by Square Footage
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Administrative Capacity:
OPPORTUNITY
Right-size the Retail Preservation Ordinance to focus on
targeted areas of concentrated retail activity
CITY-WIDE RETAIL PRESERVATION ORDINANCE
Source: Kastle Systems Back to Work Barometer
In 2015, zoning protections were passed to restrict ground floor
retail conversions to non-retail uses in the face of significant
competition for space from higher paying office tenants.
2015 MARKET CONDITIONS
•At the time, Palo Alto was experiencing “record high
commercial rental rates” (average $61.44 psf) and “low office
vacancy rates” (2.83%)
2021-2022 MARKET CONDITIONS
•2022 Q3 Silicon Valley Office Vacancy: 17.7% (Source:JLL);
2021 PaloAlto Office vacancy rates 13.64%
(Source:CommercialCafe,2021)
•2021 office average asking rents: $93.75 (Class A
Space);$37.04 (Class B Space)
•Office occupancy rates for San Jose metro are between 27.3% -
41.7%,the lowest of the top ten metro area measured by
Kastle Systems nationwide.
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Administrative Capacity:
ADDITIONAL REGULATIONS AND POLICIES
FORMULA ORDINANCE
Formula Retail Businesses have 10 or more business
locations in the United States that maintain uniformity
across merchandise, décor, scheme, trademark, etc.
OPPORTUNITY
Consider a cap (i.e. Arcata, CA), a focus on restaurants
(i.e. Carmel-by-the-Sea) a restriction by size (i.e.
Coronado)
SANDWICH & A-FRAME SIGNS
The Palo Alto Municipal Code defines dictates that these
signs must be located on private property. This effectively
renders nearly all signs along University Avenue and
California Avenue non-compliant.
OPPORTUNITY
Allow as-of-right merchandising, benches, and signage
within 2' of storefront (i.e. NYC)
ARB ARCHITECTURAL REVIEW
ARB provides aesthetic controls and design approval,
required for the issuance of building permits, to address the
visual impact of projects on adjacent properties and public
streets.
OPPORTUNITY
Clarify role of ARB and provide illustrative or plain
language design guidelines to offer businesses
predictability in the approval process
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ORGANIZATIONAL
CAPACITY &
STEWARDSHIP
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Administrative Capacity:
Arts, Culture &Entertainment
Palo Alto is well served by Arts, Culture &
Entertainment at both the City and District
Level.
Palo Alto's Economic Development service
delivery mechanisms are limited to the City
and the Palo Alto Chamber, which is a city-
wide membership organization.
At this time neither University
Ave/Downtown nor California Avenue have
active stewards to lead marketing, promotion,
event coordination,enhanced sanitation and
security (above and beyond what a city
provides).
ORGANIZATIONAL LANDSCAPE
Palo Alto
Chamber of
Commerce
D
i
s
t
r
i
c
t
C
i
t
y
Economic Development
City of
Palo Alto
Palo Alto Art
Center/
Foundation
Palo Alto
Junior
Museum
and Zoo
Lucie Stern
Community
Center/ Palo
Alto's
Children'
Theatre
Albert &
Janet
Schultz
Cultural Arts
Hall
Elizabeth F.
Gamble
Gardens
Downtown
Library
Pacific Art
League of
Palo Alto
Cal Avenue
Merchants
Association
(Defunct)
The
Museum of
American
Heritage
Downtown
Palo Alto
BID
(Suspended)
University Ave
Parking
Committee
(overseen by
Chamber)
(Defunct)
Destination
Palo Alto
(Terminated)
OPPORTUNITY
Reactivate and support improvements to
stewardship along University and Cal Ave
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→PUBLIC AND PRIVATE REALM ELEMENTS
→ACCESSIBILITY & CONNECTIVITY
→FOCUS AREA SWOT ANALYSIS
06
PHYSICAL
ASSESSMENT
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Physical environment:
SIDEWALKSTRANSPORTATION
NETWORKS
WAYFINDING/
SIGNAGE
ALLEYS
GATHERING
SPACES BUILDINGS
PARKING
ELEMENTS INFORMING CHARACTERISTICS OF
BEST-IN-CLASS RETAIL PLACES
MANAGED
…with leadership
and capacity to
engage merchants
and property
owners and
implement
improvements
SAFE
…but more
importantly
perceived as safe
ACCESSIBLE
…to a customer base
…with little friction
for arrival/departure
regardless of mode
VISIBLE
…by potential
customers either
as they drive,
bike or walk by
CHAMPIONED
…with demonstrated
signs of maintenance
and investment
PEDESTRIAN
FRIENDLY
…co-located
businesses that
encourage cross
shopping
…walkable and
with few
disruptions in
continuity
BRAND
RESONANCE
…with clear
branding strategy
and identity
ANCHORED
…by retail
destination driver(s)
… by culture,
institutional or
entertainment uses
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CITY-WIDE
ELEMENTS
→ACCESSIBILITY & CONNECTVITY
1/27/2023 DRAFT
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Physical environment:
CITY-WIDE ACCESSIBILITY &CONNECTIVITY: CONCEPTS
Regional and local transportation systems
will be relied upon by consumers within the
trade areas, near and far.
01
Regional Systems should be accompanied by
last-mile options (i.e.shuttles, bicycle,
scooters, delineated infrastructure)
02
Last-mile options are often first (and only)
options for local residents, workers, and
students.
03
Are there any physical barriers to overcome?
Are there accessibility gaps?
Is navigation made easy?
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Physical environment:
CITY-WIDE ACCESSIBILITY &CONNECTIVITY:
ROADWAY & TRANSIT NETWORKS
KEY TAKEAWAYS
•Road Network:
•Robust road network, which provides good regional
and local connectivity -Around 90% of households
own at least one vehicle.
•Network hindered by lack of grade separated
railway crossings, but there are Comprehensive
Plan policies to implement more in the future.
•Transit Network:
•Low to moderate (30 to 57) transit scores for all
districts.
•Line redundancy (mostly regionally serving) for
regional and community centers while neighborhood
centers have no service redundancy.
•Most of Palo Alto, from a geographic standpoint,
does not have access to transit within a ¼ mile
walk, including areas with lower median income
and higher existing and planned density.
•Future shuttles will provide last mile options in
places with limited transit access.
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Physical environment:
CITY-WIDE ACCESSIBILITY & CONNECTIVITY:
PEDESTRIAN &CYCLING NETWORKS
AREAS LACKING SIGNAGE/ MARKINGS*
* Focuses on key locations
relevant to focus areas
KEY TAKEAWAYS
•Pedestrian Network:
•While overall robust with walk scores from 77 to
97, some areas lack sidewalks of proportionate
scale to adjacent roadway, adequate pedestrian
crossings and median refuges, or (well-maintained)
planted buffer areas.
•Bicycle Network:
•Cycling infrastructure is robust with more planned
connectivity (bike score of 97 to 100) but
navigating by signage/markings is difficult as it is
lacking in key locations.
•Currently no micromobility programs in place.
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FOCUS AREA
SWOT ANALYSIS
→STRENGTHS: characteristics that give an advantage over others
→WEAKNESSES: characteristics that create a disadvantage relative to others
→OPPORTUNITIES: elements that could be exploited to its advantage
→THREATS: elements that could cause trouble if unaddressed
1/27/2023 DRAFT
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Physical environment:
DOWNTOWN: KEY FINDINGS
ELEMENTS STRENGTHS WEAKNESSES
Access/
Connectivity
Good transit access and
redundancy
Generally good pedestrian
connectivity throughout
Unsupported pedestrian access/desire
lines from Caltrain Station
Biking navigation hindered by lack of
signage/markings
Parking Large amount and underutilized Complicated for all and cost
prohibitive for certain populations
Wayfinding/
Signage Ample signage throughout No cohesive branding or gateway
features
Sidewalks &
Street
Furniture
Adjacent parklets increase
sidewalk space for more use
Poorly maintained and/or mismatch
furniture and bike racks
Gathering
Spaces
Good amount of public and private
gathering spaces with private
spaces being well designed
Expansive public gathering spaces with
little programming or defining
features
Alleys
Mostly around 20 ft wide with
exposure to main streets
Several blank walls
Mostly utilitarian for trash pick-up
with inconsistent lighting sources
Buildings
Good mix of eclectic architecture
Room for more bulk and density
Several existing narrow buildings with
100 ft + depth
Inconsistent treatments of storefront
vacancies
Narrow on side with angled parking
Good mix of eclectic architecture
Opportunities
Threats
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Physical environment:
CALIFORNIA AVE: KEY FINDINGS
ELEMENTS STRENGTHS WEAKNESSES
Access/
Connectivity
Good transit access & redundancy
Planned BRT with improvements
Good bicycle connectivity
Multi-jurisdictional coordination
required for BRT/stop improvements
Parking
Large amount and underutilized
Digital wayfinding in new garage
Surface parking and structures take up
large portions of developable blocks
Wayfinding/
Signage
Public art consistently provided
along the street
No cohesive branding or memorable
gateway features
Sidewalks &
Street
Furniture
Wide sidewalks along California
Avenue with well-maintained
landscaping and street furniture
Sidewalks along El Camino Real out of
proportion with street
Gathering
Spaces
Nicely designed/ maintained
station plaza
Closed street and bulb outs provide
additional public gathering space
Closed street looks and feels
temporary
Alleys
Mostly around 20 ft wide with
access to/from main streets
Heavily used rear access
Mostly utilitarian for trash pick-up
with inconsistent lighting sources
Buildings
Building facades consistently align
California Avenue with most
providing uncovered/ transparent
windows
Unremarkable architecture –some
with limited permeability
Large gap of engaging building facades
from station plaza
120 ft ROW
Opportunities
Threats
El Camino Real hostile biking/pedestrian
experience -no median refuge for crossing
20 ft ROW
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Physical environment:
STANFORD SHOPPING CENTER: KEY FINDINGS
ELEMENTS STRENGTHS WEAKNESSES
Access/
Connectivity
Good transit access and redundancy
Good pedestrian and bicycle access
to/from the district Limited bicycle connectivity once
inside the district
Parking
Large amount, well maintained with
mature landscaping and high visibility
"Park once and walk" environment
Expansive parking lots and
structures located on the periphery
creating an island effect
Wayfinding/
Signage
Ample amount of
Diverse, yet cohesive, types (including
digital)
N/A
Sidewalks &
Street
Furniture
Wide, well-maintained with generous
landscaping within district
Adequately sized along exterior roads
with planted buffers
Exterior sidewalks between
roadway and parking areas –
passthrough environment
Limited bus shelters/ seating
Gathering
Spaces
Variety of nicely designed and
maintained spaces with plush
landscaping, shade, seating, and
lighting
No gathering spaces along the
periphery
Buildings
High-quality, engaging storefronts
throughout the district, some with
spill-over
Storefronts mostly insular -
Outwardly facing storefronts are
100 -450 feet from street
Opportunities
Threats
Most direct pedestrian Caltrain
connection could use maintenance
Wide, well-maintained with generous
landscaping within district
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Physical environment:
TOWN & COUNTRY VILLAGE: KEY FINDINGS
ELEMENTS STRENGTHS WEAKNESSES
Access/
Connectivity
Robust vehicular access & adequate transit
access
Well-connected,reasonably sized
sidewalks, including delineated crossings,
and bike parking within district
Two separated north/south ped/bike paths
El Camino Real hostile
biking/pedestrian experience -
no median refuge for crossing
No east/west bicycle
connection
Parking
Ample, highly visible parking with
generous, well-maintained landscaping/
shade
"Park once and walk" environment
Expansive parking along
exterior roads detracts from
visibility of the buildings
Wayfinding/
Signage
Ample signage/wayfinding with consistent
branding
Charming signage under arcades
Not every store provides
signage on exterior of building,
limiting awareness
Sidewalks &
Street
Furniture
Comfortable sidewalk dimensions within
the district
Tree-lined sidewalks along exterior roads
Limited bus shelters/ seating
Gathering
Spaces
Utilitarian/passthrough spaces thoughtfully
design to be used as publicly accessible
gathering spaces
Lacks central gathering space
Buildings
Regionally responsive architectural style –
large arcade
Curated vacant storefronts
Subtle scale
Opportunities
Threats
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Physical environment:
MIDTOWN: KEY FINDINGS
ELEMENTS STRENGTHS WEAKNESSES
Access/
Connectivity
Good access for all modes
Comfortable sidewalks for
walking/waiting with bus seating
Good surrounding bicycle
connectivity
Lacks transit redundancy and bus
shelters
Several curb cuts along Middlefield
disrupting pedestrian connectivity
Inconsistently placed bicycle parking
Parking
Adequate parking provided with
connected parking across
independent parcels
Good visibility
Weak "Park once and walk"
environment
Minimal parking lot
landscaping/shade
Wayfinding/
Signage Eclectic mix of business signage No gateway signage/ features
Sidewalks &
Street
Furniture
Adequately sized and maintained
sidewalks along Middlefield Road
with space for landscape buffers
Planted areas along Middlefield could
be improved
Buildings set back from the road lack
delineated pedestrian paths through
parking lots
Gathering
Spaces
A few privately owned gathering
spaces seamlessly connect to public
sidewalk
Lacks a central gathering space
No publicly owned/maintained
gathering spaces
Buildings
Eclectic mix of buildings styles,
materials, and colors –authenticity
Most storefronts permeable along
Middlefield Rd.
Unremarkable and
outdated/tired architecture
Inconsistent building wall along
Middlefield Rd.
Opportunities
Threats
Planted areas along Middlefield need
improvement
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Physical environment:
CHARLESTON SHOPPING CENTER: KEY FINDINGS
ELEMENTS STRENGTHS WEAKNESSES
Access/
Connectivity
Good vehicular access
Some transit access
Colorado Rd has good bicycle and
pedestrian infrastructure
Limited bus access –no redundancy
Lacks adequate bicycle and pedestrian
infrastructure along Middlefield Rd
Parking
Ample, underutilized parking with
high visibility
"Park once and walk" environment
Majority of lot used for parking/
maneuvering
Lightly landscaped with little shade
Wayfinding/
Signage
Consistent, well-maintained
signage Outdated shopping center signage
Sidewalks &
Street
Furniture
Adequately sized and maintained
sidewalks along Charleston Rd.
Sidewalks along Middlefield out of
scale with size of street with no
vegetated buffer
Narrow pedestrian space along
storefronts in some areas
Gathering
Spaces
Underutilized space repurposed to
gathering space
Arcade along building provides
intimate seating option
Few gathering spaces, overall -Limited
space around coffee shop
Repurposed space feels exposed/ lacks
shade -Places where shade exists not
suited for gathering
Buildings Buildings well maintained with
consistent treatments
Insignificant, outdated architecture
Suburban form/scale not conducive to
longer durations of stay
Opportunities
Threats
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07
GUIDING
PRINCIPLES
1/27/2023 DRAFT
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Administrative Capacity:
REINFORCE HIERARCHY OF PLACE
•Stabilize and reinforce Downtown as a destination through improvements and
stewardship
•Embrace California Avenue as a community and neighborhood serving place by
increasing opportunities for new businesses and support for existing businesses
IMPROVE ACCESSIBILITY
•Embrace walking and biking solutions by fixing broken links and reinforcing
walkability to/from all of the City's commercial districts
•Address parking policies and systems that add complexity and cost burden on
low-wage, part-time workers
ADOPT POLICIES THAT REFLECT CHANGING MARKING CONDITIONS
•Ease the regulatory burden for businesses and revise outdated restrictions that
create hurdles to tenancy
•Focus retail and retail-like uses in places where they are market-supported
GUIDING PRINCIPLES
1/27/2023 DRAFT
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THANK YOU
1/27/2023 DRAFT